Authorised Financial Services Provider – FSP No: 859.
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Transcript of Authorised Financial Services Provider – FSP No: 859.
Authorised Financial Services Provider – FSP No: 859
2009 Pre-Budget Presentation:
“It’s Just a Jump to the Left”
Presented by: Dawie Roodt
4 February 2009
“It’s Just a Jump to the Left”
1. How your Tax Money is being spent?
2. Can the State afford the ANC Manifesto’s bill?
Basic Economic System
Production = 100
Consumption = 100
Economic Growth
Year 1:
Production = 100
Consumption
= 80
Investment = 20
Investment
= 22
Year 2: Eco. Growth = 5.0%
Production = 105
Consumption
= 83
+ 2
+ 3
Economic Growth
Things Certain in Life:Death & TAXES
Year 1:
Production = 100
Consumption = 55
Investment = 15
Taxes = 30
- 5
- 25
Scenario 1: All Taxes are Invested
Consumption = 55
Investment =15
Taxes = 30
Production
= 100 + 30= 45
Year 2: Eco. Growth = 10.0%
Production
= 110
Consumption = 62
Taxes = 30
Investment =18+ 3
+ 7
Economic Growth
Scenario 1
Scenario 2: All Taxes go to Expenditure
Consumption = 55
Investment =15
Taxes = 30
Production
= 100+ 30
= 75
+ 10
+ 20
= 25
Year 2: Eco. Growth = 7.0%
Consumption = 60
Investment =17
Taxes = 30Production
= 107+ 2
+ 5
Economic Growth
Scenario 2
Scenario 1
Scenario 3: Efficiency Loss
Consumption = 55
Investment =15
Taxes = 30
Production
= 100+ 30
= 73
+ 7
+ 18
= 22
!Efficiency Loss! + 25
Investment = 17.
Year 2: Eco. Growth = 6.0%
Consumption = 59
Taxes = 30Production = 106.0
+ 2
+ 4
Economic Growth
Scenario 3
Scenario 1
Scenario 2
Year 2: Eco. Growth = 6.0%
Consumption
= 59
Investment= 17
Taxes = 30Production
= 106.0
Want80
as before !!=127=106
!!!
• Consumption > Production
• CA Deficit
• Currency Volatility
• Pressure on Prices, i.e. Inflation
• Upward Pressure on Interest Rates
Adverse Impacts…2008 2009
CA Balance:GDPConsumption > Production
-7.5% -5.1%
Inflation (CPI, average)
11.6% 4.5%
Interest Rate (Prime, end of yr)
15.0% 11.5%
Rand(end of yr)
R9.52 R9.00
HH savings -0.3% (Q3) 0.1%
Economic Growth (full year)
3.0% 0.5%
EXTERNALLY
Undermining the Economy
INTERNALLYThe State
Takes from Savers – Gives to Spenders
CA Deficit
RandInflation
Interest %Savings
In Reality…..
Source: SARB, Efficient Research 2008
But in Reality…2007
GDP R2 000bn
GDP Growth (real) 5.1%
Total State Revenue R537bn
Total Company Income Tax R137bn
Total Investment R422bnSCRAPPE
D ??
What if Company Tax Scrapped?
2007
GDP R 2000bn
GDP Growth (real) 5.1%
Total State Revenue (excl CIT)
R537bn – R137bn = R400bn
Total Company Income Tax R0bn
Total InvestmentR422bn + 0.63*R137bn
= R422bn + R87.5bn= R509.5bn
5.1% + 0.9% = 6.0%
R 2020 bn
6 yrs R537bn
Therefore, Needed
1. Higher Savings:– Lower Corporate Taxes– Lower Personal Income Taxes
2. Less Social Expenditure:– 12m+ Grants Recipients– Education Results ??
3. Focus on State Efficiency
4. More Focus on Capital Expenditure/ Productive Capacity
Treasury’s Playground:
2008/09
Comparing Apples with Apples…2008/09 (Budget)
SA Reserve BankNational Government Finance
Revenue 625,4
Expenditure 611,1
Balance 14,3
+ Social Security
= Consolidated Central Government
+ provincial
+ local government
= Consolidated General Government
+ public enterprises
= Non-financial public sector?
National TreasuryMain Budget
Revenue 625,4
Expenditure611,1
Balance 14,3
+ Social Security
Revenue 24,7
Expenditure20,5
= Consolidated National Budget Balance 18,5
0.6% of GDP
0.8% of GDP
Three Spheres for Revenue
• Provincial– Motor vehicle licenses– Casino (gambling) taxes– Liquor licenses– Fuel levy?
• Local– Property rates– RSC levies (prior to 06/07)
• National– PIT, CIT, VAT, Fuel levy
Source: 2008 Tax Statistics,National Treasury and SARS
Revenue
Revenue
Revenue Categories
Strong Demand
Economic Activity,Commodity CycleWage Increases,Inflation… 12.0%
Revenue Sources (Est. 2008/09)
31%
28%
25%
3%
4%
9%
Individual Tax
Companies (incl STC)
VAT
Excise Duties
Fuel Levy
Other
National Tax Revenues
Registered Income Tax Payers
Registered Taxpayers
Individuals Companies Trusts PAYE
2004/05 4.1m 930k 320k 300k
2005/06 4.5m 1.1m 345k 330k
2006/07 4.8m 1.2m 375k 350k
2007/085.2m
(9.3% y/y)1.6m
(30.0% y/y)385k
(2.8% y/y)380k
(8.8% y/y)
Source: National Treasury & SARS, 2008, business Day 3 Feb 08
45% Total PITpaid by top 5.0%
75% Total CIT paid by 1.2% companies
2008/09 in Review:Revenue
Budget ’08 MTBPS ’08Efficient Estimate
Diff. (%)
Income Tax 369.7 380.7 383.8 14.0 (3.8%)
Individual 191.1 201.0 196.8 5.8 (3.0%)
Company 156.5 158.9 163.8 7.3 (4.7%)
STC 20.0 18.2 19.7 -0.3 (-1.5%)
Other 2.2 2.6 2.2 -0.1 (0.0%)
VAT 167.0 167.0 154.2 -12.9 (-7.7%)
Fuel Levy 26.4 25.5 25.0 -1.4 (-5.3%)
C&E&Other 91.2 80.4 81.7 -9.5 (-10.4%)
SACU -28.9 -27.1 -27.5 -1.4 (-4.8%)
Total 625.4 626.5 617.2 -8.1 (-1.3%)
Reasons for Under Shooting• Individual tax
High wage and salary negotiations (wage inflation)
• Company taxCommodity prices (“Two halves” of 2008 – commodity
boom/bust)
• STC Retained income
• VATConsumption expenditure plummets
Total Budget Revenue
• Interest
• Dividends
• Rent on land
• Sales of good and services
• Fines and penalties
• Botswana, Lesotho, Namibia, Swaziland (BLNS)
• Similar excise and customs (import) duties
•Revenues pooled and distributed based on formula
Source: 2008 Tax Statistics,National Treasury and SARS
SA Contributions to and received from SACU Pool
-30-20-10
01020304050
2000 2001 2002 2003 2004 2005 2006 2007 2008
Rbn Contribution to and received from SACU pool
Contribution to (include some BLNS collections) Receive from Loss
Source: 2008 Tax Statistics,National Treasury and SARS
SACU Revenue Share Formula
1. Customs component– Country’s share of intra-SACU trade, including re-
exports
2. Excise component– Based on GDP, net of development component
3. Development component– Set at 15% of total excise pool– GDP p.c. vs average SACU GDP p.c.– GDP < SACU average: compensated
Source: 2008 Tax Statistics,National Treasury and SARS
SACU Economic IndicatorsBotswana Lesotho Namibia South
AfricaSwaziland
GDP per capita R51.4k R6.3k R26.4k R41.1k R18.6k
To SACU pool (07/08) R0.2bn R0.1bn R0.4bn R45.4bn R0.1bn
From SACU pool (07/08) R9.0bn R4.1bn R6.6bn R21.5bn R4.9bn
Win or loose R8.8bn R4.0bn R6.2bn R23.9bn R4.8bn
Out:In Ratio 45x 41x 16x 0.5x 49x
SACU receipt : GDP 10.3% 36.3% 12.5% 1.1% 23.9%
SACU : state revenue 34.8% 91.2% 50.4% 4.5% 88.5%
Source: 2008 Tax Statistics, IMF, own calculations *Calculated using average R/$7.05
Expenditure
“Budget priorities for the period ahead are focused on social solidarity and building a more equitable society”
(Source: 2008 MTBPS)
Expenditure
Rein in Expenditure
Lower foreign debt
Spending Priorities Expenditure: Functional Classification (2008/09 Est.)
6%
15%
16%
8% 1%
19%
16%
8%
11%
54%
General Gov Protection Serv. Eco. & Infra.State Debt Cost Other EducationSocial Dev. Housing, Com Dev. Health
Social Expenditure
Source: Various budgets, own calculations
2008/09 in Review:Expenditure
R bn Budget ’08 MTBPS ’08EfficientEstimate
Diff. (%)
Voted Amounts 345.3 370.2 366.4 21.1 (6.1%)
Central Gov.* 48.4 51.6 48.9 0.5 (1.0%)
Fin. & Admin. 23.6 33.8 31.1 7.5 (31.8%)
Social Services 117.3 121.0 118.1 0.8 (0.7%)
Justice & Protect. 88.7 90.3 93.2 4.4 (5.1%)
Eco. & Infrastruc. 67.2 73.5 75.0 7.8 (11.6%)
State Debt Cost 51.2 54.0 52.7 1.5 (2.9%)
Transfer Provinces 199.4 204.0 205.2 5.7 (2.9%)
Other 15.2 7.3 14.1 -1.1 (-3.9%)
Total 611.1 635.5 638.8 27.7 (4.5%)
* Includes: Provincial and local government
Balance/Debt
Revenue and Expenditure
Fiscal Balance
-5
-4
-3
-2
-1
0
1
1996 1998 2000 2002 2004 2006 2008 2010
Budget balance adjusted for cash flows, to GDP
Source: SARB Forecast: Efficient Group
State Debt
10
20
30
40
50
1996 1998 2000 2002 2004 2006 2008 2010
Total national State Debt, to GDP
Source: SARB Forecast: MTBPS, Efficient
Domestic debt: R485.5bn
Foreign debt: R81.9bn
The Grey Area- Applying Monetary Policy the Fiscal Way!
Source: SARB, Treasury
Liquidity drainage
‘Loss’ paid by State to SARB:
Interest received = 3%
Interest Paid = 8%
“Cost” = R3bn
Summary 2008/09
Budget ’08 MTBPS ’08EfficientEstimate
Difference(Eff – Budget)
Revenue 625.4 626.5 617.2 -8.1
Expenditure 611.1 635.5 638.8 27.7
(Deficit)/Surplus 14.3 -8.9 -21.6 35.9
% of GDP +0.6% -0.4% -0.9%
Budget 2009/10Reality Check!
Summary 2009/10
Budget ’08 MTBPS ’08EfficientEstimate
Revenue 692.9 682.9 667.2
Expenditure 681.3 735.0 749.6
(Deficit)/Surplus 11.6 -52.1 -82.4
% of GDP +0.5% -2.0% -3.4%
Expenditure
Trev’s Plans…(MTBPS)
“Achieving Social Solidarity and Equitable society”
Budget Priorities• Education
– Broaden employment opportunities
– Raise productivity
• Health
– Human resource capacity
– Child mortality
– HIV, TB, etc.
• Crime Prevention
– Detective and investigation services
– Improving court processes
• Infrastructure
– Water, sanitation, housing, electricity, public transport
• (Rural ) Poverty Alleviation
– Raise rural incomes
– Improve livelihoods (access to arable land, agri services)
Infrastructure Spending
• Public sector infrastructure spending, R568.1bn (+18.0% y/y/) over medium term (Expect R70bn+ more)
• Capex to total expenditure expected to rise from 6.3% in 2004/05 to
11.0% in 2010/11 (MTBPS 2008)
• Total: R342.8bn• 73% Generation• 12% Transmission• 10% Distribution
On Whose Books?Credit Rating?
Many Smiles…
Social Grants Beneficiary Numbers
Grant Type
(‘000)
2003 2006 2007 2008 (projected)
% Change
2003-2008
Old Age Grant 2,022 2,144 2,195 2,225 10%
Disability Grant 953 1,319 1,422 1,409 47.8%
War Veterans Grant 4 3 2 2 -50.0%
Foster Care Grant 138 313 400 446 223.2%
Care Dependency Grant (disabled)
58 94 98 110 89.7%
Child Support 2,630 7,045 7,863 8,208 212.1%
Total 5,808 10,918 11,991 12,402 106.5%
Source: 2008 Budget2008: 12.5m recipients 26.0% of SA population
Fraud!! – R1bn annuallyFraud!! – R1bn annually
Source: 2008 Budget
Changes to Social Grants
Grant Type (R) 2007 20082009 Efficient
EstCost to State
Old Age Grant – men age 61 (63)
870 940 1050 R3.0bn
Disability Grant 870 940 1050 R1.8bn
War Veterans Grant 890 960 1080 R0.0bn
Foster Care Grant 620 650 720 R0.4bn
Care Dependency Grant (disabled)
870 940 1050 R0.2bn
Child Support 18yrs?200 220 250
R3.0bn + (R3.0bn?)
Grant in Aid (full-time attendance)
200 210 240 n/a
Additional: R8.3bn (R11.3bn?)
Other Expenditure Surge in Social Spending Wage Subsidy (<R46k) Job Security/ UIF More for Education and Health More for Land Reform Budget Service delivery to get more and more Capital spending
World Cup Housing
Let’s hope; safety and security - World Cup
JZ’s Plans…(Manifesto)
Spending Plans..
Education HealthPoverty
Alleviation
Manifesto ? ? ?
Budget 2008/09
R120.5bn R72.9bn R105.1bn
TOTAL R120.5bn R72.9bn R105.1bn
Manifesto: Education
Spending Plans..
Education HealthPoverty
Alleviation
Manifesto R2.0bn+ ? ?
Budget 2008/09
R120.5bn R72.9bn R105.1bn
TOTAL R122.5bn R72.9bn R105.1bn
Manifesto: Health
Spending Plans..
Education HealthPoverty
Alleviation
Manifesto R2.0bn+ Rbn? ?
Budget 2008/09
R120.5bn R72.9bn R105.1bn
TOTAL R122.5bn R72.9bn R105.1bn
Manifesto: Poverty Alleviation
Spending Plans..
Education HealthPoverty
Alleviation
Manifesto R2.0bn+ Rbn? R40bn+
Budget 2008/09
R120.5bn R72.9bn R105.1bn
TOTAL R122.5bn R72.9bn R145.1bn
Budget Deficit:GDP = 5.0% ? (3.4% prev)
Taxpayer’s Pains…
The Salary Story….
Total Remuneration
Salaries/GDP @ cap
Salaries/Ave Grant p yr
President R 2,107,224 51 187
Speaker: National Assembly R 1,896,546 46 168
Minister R 1,612,053 39 143
Deputy Minister R 1,327,560 32 118
House Chairperson R 1,232,766 30 109
Parliamentary Council: President R 1,043,067 25 93
Member of Parliament R 691,641 17 61
Municipal Counselor R 322,899 8 29
Department 2002-03 2003-04 2004-05 2005-06 2006-07
Arts & Culture,Sport & Recreation
Public Works
Independent Complaints Directorate
Land Affairs
Transport
Labour
Justice
Parliament
Health
Defence
Correctional Services
Water Affairs & Forestry
Home Affairs
Qualified Audit Opinions: General Report of the Auditor General on Audit Outcomes for the Financial Year 2006-07
Introducing…The White Elephants
Elephant #1: SAA
SAA’s Bill:
Cash:
03/04 – 07/08:
R9.2 bn!!
Guarantees:
03/04 – 07/08:
R2.9 bn!!
Public vs Private
SAA Comair
2006: Profit/(Loss) (R883.0m) R 78.8m
2007: Profit/(Loss) (R850 m) R 109.2m
Employee/Aircraft Ratio
8 227/58 = 147
1559/23 =68
Profit..“Restructuring costs”
Dumbo 2 & Dumbo 3:
Sentech Denel2006: Profit/(Loss)
(R85.3m) (R 1,3 bn)
2007: Profit/(Loss) (R 17.6m) (R 549.1m)
2008: Profit/(Loss) R17.5m (R 347.2m)
TOTAL (R 85.4 M) (R 2,2 BN)
Receives R 200m
Receives R 257m
Receives R 2 BN
RECEIPTS R 457 M R 2.0 BN
Revenue
Mercy Please Trev?
Efficient’s Possible, Likely, Probable New Tax Table
2008/09 2009/10
Taxable Inc (R) Rates of Tax Taxable Inc (R) Rates of Tax
0 – 122 500 18% 0 – 135 000 18%
122 501 – 195 000 R21 960 + 25% 135 001 – 210 000 R24 300 + 25%
195 001 – 270 000 R40 210 + 30% 210 001 – 300 000 R43 050 + 30%
270 001 – 380 000 R62 710 + 35% 300 001 – 420 000 R70 050 + 35%
380 001 – 490 000 R101 210 + 38% 420 001 – 550 000 R112 050 + 38%
490 001 – R143 010 + 40% 550 001 – R161 450 + 40%
Rebates Rebates
Primary 8 280 Primary 9 000
Tax Threshold Tax Threshold
Below 65 46 000 Below 65 50 000
Effect of Adjustment
Income 2008/09 Tax 2009/10 Tax Difference
R100k R9 720 R9 000 R720 (7.4%)
R150k R20 555 R19 050 R1 505 (7.3%)
R200k R33 430 R31 550 R1 880 (5.6%)
R300k R64 930 R61 050 R3 880 (6.0%)
R400k R100 530 R96 050 R4 480 (4.5%)
R500k R138 730 R133 450 R5 280 (3.8%)
“Cost” = R8.0bn
Do not cover inflation!
Income Tax: Indiv. & CompaniesType 2008/09 Possible changes ?
Medical Aid Contributions R570 first two members (R530, +7.6%)
R345 second members
(R320)
R630 first two members (10.5%)
R380 second members (10.5%)
Interest Exemption R19 000 (R18k) R25 000
Capital Gains Tax R16 000 (R15k) R20 000
STC 10% Replaced by Dividend withholding tax
SME Presumptive Turnover Tax
Include Professional service providers?
(accountants, optometrist
< R100k Zero Bracket Adjustment
R100 001 – R300k 2.0% > 100k
R300 001 – R500k R4000 + 4.0%
R500 001 – R750k R12 000 + 5.5%
R750 001 – R1m R25 750 + 7.5%
Carbon Tax Paying for your footprint?
• 2008 Budget Proposal: – R100/ton on carbon dioxide equivalent– Increased to R250/ton by 2010
• SA economy based on (low priced) carbon intensive energy
• Involve electricity demand management, renewable energy and reduction in emissions (Min. V Schalkwyk)
• Cap-and-trade system (Deloitte)– Incentivise behavioral change
Large Industrial Projects
• R5bn of tax incentives for ‘large projects’ meeting SA’s ‘industrial-policy objectives’
• R10bn over next three years• To replace oversubscribed strategic industrial projects
incentive.
Electricity Levy
– Where’s the incentive?– Where’s the alternative?– Estimated R2.0bn to revenue in 2008/09 and R4bn in
2009/2010. – 2c/kWh up to 4c/kWh?
Life’s Little Pleasures
Sin Taxes’ contribution to state revenue fiscal 2008/09 (09/10):
Beer R5.5bn (R5.8bn)
+ Wine and spirits R3.0bn (R4.3bn)
+ Cigarettes R8.5bn (R9.6bn)
= R17.0bn (2.8% of revenue) (R19.7bn) (2.9% exp)
Disposable income under pressure…?
What Else…
Forex Controls- Blessing or Burden?
• Blessings:– Protect from risky international investments– We need to keep capital in SA– “Unpatriotic”
• Burdens:– Capital should be free to flow to highest yield– Limits business and economic growth– Complicates international investment structures– The return of the “FORWARD BOOK”
Cost of Forex Controls
Source: SARB
Talking about the SARB…
Central Banker
CountryGDP @
cap PPP $
Salaries,PPP $
Salaries/GDP p cap
CPI
Joseph Yam Hong Kong 44,413 913,262 20.6 2.7%
Mervyn King BOE 36,571 440,063 12.0 3.1%
Jean-Claude Trichet
ECB 33,882 289,352 8.5 1.1%
Tito Mboweni
SARB 10,187 814,751 80.0 10.1%
Mark Carney Canada 39,339 297,617 7.6 1.2%
Ben Bernanke
US 47,025 144,059 3.1 0.1%*
* y/y, all urban consumers
… or a jump to the reality!
An (affordable?) Wish ListBased on fiscal 2008/09 estimates
Tax Category Wishes Granted in 2008 We want more!
PIT (Mid/high income) Lower Lower
Company tax Lower ✓ Lower (i.e. R5.8bn loss in revenue, per 1%)
STC Lower/Scrap Scrap (R20.0bn loss)
VAT Higher Higher (i.e. R11.0bn gain in revenue, per 1%)
Transfer duty Abolish Abolish (R6.0bn loss)
Customs Duties Lower/Scrap Lower/Scrap (SACU outflow!!)
Small comp. VAT returns Lower frequency/Higher threshold ✓
Flat tax rate 22%
… or just a jump?
Manuel: Lucky number 13?
Possible successors: • Mandisi Mphalwa (Min. trade and industry)• Ndlanhla Nene (Deputy Finance minister)• Cyril Ramaphosa (businessman, ex politician)• Max Sisulu (ANC national executive committee)
www.efgroup.co.za
Authourised Financial Services Provider – FSP No: 859